1

PALAY, INC. and ALBERT ONSTOTT, petitioner,

vs.
JACOBO C. CLAVE, Presidential Executive Assistant NATIONAL HOUSING AUTHORITY and NAZARIO DUMPIT respondents.

FACTS:
Palay, Inc., through its President, Albert Onstott executed in favor of private respondent, Nazario Dumpit, a Contract to Sell a parcel of Land in Antipolo Rizal. Paragraph 6 of the contract
provided for automatic extrajudicial rescission upon default in payment of any monthly installment after the lapse of 90 days from the expiration of the grace period of one month, without
need of notice and with forfeiture of all installments paid.

Respondent Dumpit paid the downpayment and several installments, the last one being paid on 1967. In 1973, or almost six (6) years later, private respondent wrote petitioner offering to
update all his overdue accounts with interest, and seeking its written consent to the assignment of his rights to a certain Lourdes Dizon. Palay Inc. informed respondent that his Contract
to Sell had long been rescinded pursuant to paragraph 6 of the contract, and that the lot had already been resold.

Questioning the validity of the rescission of the contract, respondent filed a letter complaint with the National Housing Authority (NHA) for reconveyance with an altenative prayer for
refund. The NHA, finding the rescission void in the absence of either judicial or notarial demand, ordered Palay, Inc. and Alberto Onstott in his capacity as President of the corporation,
jointly and severally, to refund immediately to Nazario Dumpit the amount of P13,722.50 with 12% interest

ISSUE:
Whether petitioners Palay Inc and Onstott be should held solidarily liable for the refund of the installment payments.

HELD:
Regarding the personal liability of petitioner Onstott who was made solidarily liable with Petitioner Corporation for refund, it is basic that a corporation is invested by law with a personality
separate and distinct from those of the persons composing. As a general rule, a corporation may not be made to answer for acts or liabilities of its stockholders or those of the legal
entities to which it may be connected and vice versa. However, the veil of corporate fiction may be pierced when it is used as a shield to further an end subversive of justice or for
purposes that could not have been intended by the law that created it or to defeat public convenience, justify wrong, protect fraud, or defend crime; or to perpetuate fraud or confuse
legitimate issues or to circumvent the law or perpetuate deception or as an alter ego, adjunct or business conduit for the sole benefit of the stockholders. We find no badges of fraud on
petitioners' part. They had literally relied, albeit mistakenly, on paragraph 6 (supra) of its contract with private respondent when it rescinded the contract to sell extra judicially and had sold
it to a third person.

In this case, petitioner Onstott was made liable because he was then the President of the corporation and has to be the controlling stockholder. No sufficient proof exists on record that
said petitioner used the corporation to defraud private respondent. He cannot, therefore, be made personally liable just because he "appears to be the controlling stockholder".